Superannuation Death Benefits Tax

This assignment explores the taxation of superannuation death benefits in Australia, focusing on the 2017/18 financial year's tax rates. It presents several case studies involving different beneficiaries (children, spouses) with varying circumstances (dependence, incapacity). Each scenario details the calculation of taxable amounts and applicable tax rates based on individual beneficiary types and superannuation fund structures.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Diploma of Financial Planning + SMSF
Module 3 Workplace Simulation
Submission Instructions:
Key steps that must be followed:
 Please complete the Declaration of Authenticity at the bottom of this page.
 Once you have completed all parts of the assessment and saved it (e.g. to your
desktop computer), login to the Monarch Learning Management System (LMS) to
submit your assessment.
 In the LMS, click on the file ”Submit DFP+SMSF Module 3 workplace simulation” in the
Module 3 section of your course and upload your assessment file/s by following the
prompts.
 Please be sure to click “Continue” after clicking “submit”.This ensures your assessor
receives notification – very important!
Click here to go to the Monarch LMS
Declaration of Authenticity*
I certify that the attached material is my original work. No other person’s work hasbeen used without due
acknowledgement. I understandthat the work submitted may be reproduced and/or communicated for the purposeof
detecting plagiarism.
Student Name*: Date:
* I understand that by typing my name or inserting a digital signature into this box that I agree and am bound
by the above student declaration.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Important assessment information
Aims of this assessment
This assessment covers the fundamentals of superannuation. It covers spouse contribution rules
and strategies. It explores the making of non-concessional contribution strategies including
addressing the ‘bring-forward’ rule. The tax consequences on concessional and non-concessional
‘caps’ is explored, as are the tax consequences on superannuation contributions and withdrawals.
The differentiation between employer and membercontributions (i.e. different contribution types)
is explored. Transition-to-retirement strategies are covered as are the tax implications of taxable
versus tax-free superannuation benefits paid out to members or their beneficiaries. SMSF’s are
addressed in the context of using limited recourse borrowing arrangements. Bare Trusts are
explored as the holding mechanism for SMSF assets that are used as security in the borrowing
arrangement. The rules regarding business real property are explored in the context of making
concessional or non-concessional in-specie contributions into a SMSF. Rules on trusteeship of
SMSF’s are covered including differences between individual and corporate trustee arrangements.
Membership rules around an SMSF are covered including familial rules and employer/employee
rules. Rules on investment strategies within SMSF’s are explored. Death benefits paid from
SMSF’s are also addressed, including estate planning issues and re-contribution strategies.
Marking and feedback
This assignment contains 5 assessment activities each containing specific instructions.
This particular assessment forms part of your overall assessment for the following units of
competency:
 FNSASICU503
 FNSFPL502
 FNSFPL503
 FNSSMS501
 FNSSMS505
 FNSSMS601
 FNSSMS602
 FNSSMS603

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer, it
must be fundamentally outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question) may also be deemed
not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include
plagiarism may also be deemed not-yet-competent. Please note, additional information regarding
Monarch’s plagiarism policy is contained in the Student Information Guide which can be found
here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your Trainer/
Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your assessor advising your
assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas
deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting
competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Skill based questions:
Where you are asked to write as though you are speaking to a client, your answers must show
your ability to:
 understand your client’s concerns/perspective/views
 show empathy
 display a professional response
 explain ideas clearly and simply so your client can understand the issues
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here to
assist you 

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all10 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 1-2 hours
Assessment Activity 1
Technical Issues
Superannuation

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Background
As an adviser it is important to be aware of all the amounts that are being contributed to your client's
superannuation fund/s. Getting this wrong can have a detrimental effect on your client's financial situation,
not to mention the extra paperwork and time that is required to rectify excess contributions.
Year 1 scenario
Jim is 62 years old and has been a client of yours for many years. Jim earns a salary of $100,000 plus
Superannuation Guarantee (SG) contributions. He also salary sacrifices into superannuation such that the
combination of his salary sacrifice contributions and his annual SG amount equals his current concessional
contributions cap. Jim has accrued a balance of $1.6 million in his accumulation account. Last year Jim's wife
Mandy, aged 60, ceased working in order to help look after their grandchildren. Mandy has a small
superannuation balance of just $60,000.
Jim is keen to grow his super balance as much as he can so that he can continue to provide support for Mandy
and himself when they retire.Jim has recently sold some shares so he now has an extra $200,000 which he
would like to use to increase his super balance.
Question 1.1
Based on 2017-18 rates, calculate Jim's annual Sperannuation Guarantee (SG) contribution. Please show your
workings.
Question 1.2
Based on 2017-18 rates, calculate Jim's salary sacrifice contribution for the 2017-18 year. Please show your
workings.
Superannuation Guarantee Contribution:
Annual Salary x 9.5% = $100000 x 9.5% = $9500
Salary Sacrifice Contribution:
Concessional Contribution Cap – Superannuation Guarantee Contribution
= $25000 - $9500
= $15500

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.3
Is it possible for Jim to contribute the $200,000 into his super fund as a non-concessional contribution? Explain
your anwer.
Question 1.4
As Mandy is no longer working, is she permitted to make any further contributions into her super fund. Please
explain your answer.
Question 1.5
Jim's friend has been talking about contributions splitting and Jim has asked you if this issomething that he
could do. Discuss with Jim how much of his contributions could be split with his wife Mandy.
Question 1.6
If Jim gave his $200,000 to Mandy, would Mandy be able to contribute the $200,000 to her super fund as a
non-concessional contribution?
Explain your answer.
JIM cannot contribute to $200,000 in to his super fund as a non-concessional contribution due to
the fact that according to the new rules an individual with a balance of 1.6 million or more will no
longer be qualified to make non-concessional contributions.
Contribution splitting is possible among the couple and therefore the members are able to
transfer up to 85% of their salary sacrifice and deductible contributions. However one should
check with your fund if such an option is available and also confirm whether any fees and/or
deadlines apply
Mandy does not need to work in order to make super contributions, including non-concessional
contributions, as she is under the age of 65 years. It has been stated in the Australian Taxation
Office that one who Is not employed can make contributions in their super fund till they attain
the age of 65 years.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Year
2 scenario
In year 2 when Jim is 63, his father passed away leaving him an inheritance of $300,000.The share market
suffered some dramatic losses in June of the previous year and Jim's super account balance fell to $1.3 million
as at 30 June of the previous year. Jim is not concerned about the losses as he understands the volatile nature
of equities and his investments are still producing dividends.
Question 1.7
Is Jim able to contribute his $300,000 inheritance into his super fund? Explain your answer.
Question 1.8
As Jim is now 63 years old, he is considering retirement in about 12 months time and you have been discussing
the retirement income stream phase with him.
Explain to Jim how giving the $300,000 from his inheritance to Mandy to contribute to her super fund would
enable them, as a couple, to have a higher balance in the retirement income stream phase.
Mandy can contribute $200,000 to her super fund as a non-concessional contribution as she has a
lower balance of 1.6 million and therefore has the ability to contribute the to the maximum cap
limit.
He is able to contribute the same as it is seen that his balance has lowered down to 1.3 million
and as his age is 63 years, he can make contributions up to $540,000 according to the balance as
she has. Therefore, he can invest the inherited amount in the super fund.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.9
Why may it bemore beneficial to have as much money invested in the retirement income stream phase as
possible compared with leaving it in the accumulation phase?
Jim giving the $300,000 from his inheritance to Mandy to contribute to her super fund would
enable them, as a couple, to have a higher balance in the retirement income stream phase because
it is seen that Mandy is not working and has a super fund of $60,000. In this scenario, tranferring
the fund to the balance of Mandy would mean paying lower level of tax rate and thereby increasing
the retirement income scheme for the couple.
It is beneficial to have as much money invested in the retirement income stream phase as
possible compared with leaving it in the accumulation phase because it is seen that retirement
income stream phase provides a tax free component and therefore the money invested in this
scheme would be tax free. However, keeping the balance in the accumulation phase would mean
that one has not started a pension with the value available in the superannuation account and
therefore this amount us liable for tax and will be subject up to 15% earnings tax.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.10
If a client already has sufficient cashflow from other investments outside of superannuation, what is a potentia
l downside to transferring money to a retirement phase income stream?
Assessment Activity 2
Case Study
Superannuation
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all10 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours
It is seen that the downside of transferring money to a retirement phase income stream would
mean that the level of returns from the income would become lower and it is even seen that
many individuals in order to evade tax try to do the same but the ATO has restricted individuals
from transferring the amount from the cash flow up to a certain limit.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Scenario 1 - Background
Genevieve is age 62 and is considering retiring permanently from the workforce however she is concerned that
she may become bored in retirement. She has come in to discuss issues around taking a pension from her
superannuation account which is currently in accumulation phase.
She has sought your advice regarding some superannuation issues she is unsure about.
Required:
Answer Genevieve’s queries in a way that will be both clear to her and also comprehensive.
Question 2.1
If Genevieve commences a transition to retirement (TTR) income stream (pension)after 1 July 2017 while she
continues to work, explain how the earnings on her superannuation investments will be taxed.
Question 2.2
Explain to Genevieve how the tax treatment of her super investments will be different if she retires
permanently from the workforce and then commences a retirement phase income stream (pension).
Question 2.3
While the current tax treatment of income received from a TTR pension will not change, the tax
treatment of investment earnings on super fund assets that support it will change from1 July this
year. Earnings on fund assets supporting a TTR income stream will be subject to the same
maximum 15% tax rate that applies to super accumulation funds. This is the amount that would
be charged.
As she retires permanently, the tax structure would change and as she is retired her income
would become tax free and therefore she can gain more from the retirement phase income
steam. On the other hand, it can be stated that if she still continues and has attained the
preservation age then her rate of tax would reduce by a certain percentage.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Genevieve has now decided to continue working and commence a transition to retirement (TTR) income
stream (pension). At what stage will Genevieve have a transfer balance account with the ATO?
Question 2.4
Explain to Genevieve, in detail, the difference between the tax-free component of her super and the taxable
component of her super. Note that the taxable component comes from a taxed fund.You should mention what
is included in each of the components.
Question 2.5
If Genevieve was able to withdraw money from her super fund, explain how each component would be
treated from a tax perspective.
Genevieve have a transfer balance account with the ATO at the accumulation phase as
transferring the amount from this phase would mean that one is starting their TTR scheme.
The tax free component of the super interest of a member is the entire value of the contributions
segment and the crystallized segment. The contributions section generally includes all
contributions made after 30 June 2007 that have not been, and will not be, included in your
fund's assessable income. These are most commonly member contributions where a tax
deduction has not been claimed by the member.
The taxable component of a member's super interest is the total value of the member's super
interest less the value of the tax-free component. Contributions that would form part of the
taxable component are generally amounts included in the assessable income of the fund. This
would include concessional contributions and earnings. The taxable component of a super
benefit may consist of a taxed element and/or an untaxed element, depending on whether the
benefit is paid from a taxed or untaxed source. Funds will need to determine these elements
before paying any super benefits.
As Genevieve is over the age of 60 years during her super withdrawal, no tax would be levied
over the super benefit withdrawal unless Genevieve is a member of specific kind of public sector
super payment.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Scenario 2 - Background
Genevieve’s sister,Fiona, is age 59 and has permanently retired from the workforce.
Fionais considering withdrawing a lump sum of $250,000 from her superannuation fund, which is a taxed fund.
Her total super benefit is $700,000 and 90% of the total benefit isa taxable component. The other 10% of the
benefit is a tax-free component.
Required:
Answer Fiona’s queries in a way that will be both clear to her and also comprehensive.
Question 2.6
Explain how Fiona’s withdrawal will be treated for tax purposes.
Question 2.7
As Fiona is 59 years old and has attained the preservation age she is liable to withdraw an
amount that is the low rate threshold of $200,000. Therefore, as Fiona is withdrawing $250,000
she would have to pay tax for the additional $50,000.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Calculate the amount of tax, if any, which will be payable if Fiona does withdraw a lump sum of $250,000.
Question 2.8
Instead of taking a lump sum, Fiona uses her $700,000 to commence a retirement phase income stream and
withdraws the minimum annual pension amount. How much will she have to withdraw in the first year?
Question 2.9
If Fiona only withdraws the minimum annual pension amount for the year,explain how the withdrawal tax will
be calculated.
In the first year, Fiona would be liable to withdraw 4% of the total amount that amounts to
$28,000.
As Fiona only withdraws the minimum annual pension payment amount for the year, the
earnings on her pension account are exempt from tax.
The tax would be levied on $50,000 at 17% that includes the Medicare levy and the amount of
tax would be $50,000*17% and the amount would be $8500.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Scenario 3 - Background
Fiona used to work with Patty and they are now best friends. Whilst Fiona chose to permanently retire, Patty,
who is 62 years old, has decided to leave the company where she and Fiona worked for the last 25 years and
start a new job with a rival company.
Question 2.10
Patty would like to renovate her home and asks you if she is able to access her superannuation money.
Advise if this is possible and explain why/or why not?
Patty cannot access the superannuation money of Fiona as they are not married and are not even
related to each other. However, he can gain access to the account if Fiona makes him the
nominee of her fund or grants him the permission legally to access the account.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Assessment Activity 3
Simulation Exercise
Self-Managed Super funds
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all9 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Background
HenryPowell and MariePowell are both 48 years of age, and have been happily married for 22 years with two
older children Jessica and Amanda (22 and 16 years old respectively). Henry and Marie work together in their
own business called 'Soaps for you' which distributes gift wrapped soap to small gift shop retailers across
Australia and overseas. The business has been running for 7 years. They have 8 staff and the last 2 years have
seen their company’s revenue growing strongly year on year. Eighteen months ago, after doing considerable
research, Henry and Marie decided to set up a Self-Managed Superannuation Fund (SMSF) to take control of
their investments and to provide more flexible options. Accordingly, they established a corporate trustee being
HMP Pty Ltd as trustee for the Henry and MariePowell Superannuation Fund with both Henry and Marie as
Directors of the trustee company.
As at today, Henry and Marie currently have a combined balance of $720,000 in their SMSF, with $500,000 in
an accumulation account for Henry and $220,000 in an accumulation account for Marie. The funds are
currently sitting in short term cash accounts with the CBA.
Scenario 1
A warehouse around the corner from where 'Soaps for you'currently operates from, has come up for sale.
Henry and Marie are keen to purchase the property using their SMSF monies because it will allow the business
to grow and they believe it will be a sound investment too. The sale price of the property is $995,000 so some
borrowing would be required.
Questions for Scenario 1
Question 3.1
Answer true or false for each of the following statements relating to borrowing within the Henry and
Marie Powell Superannuation Fund.
“It will not be possible for the SMSF to purchase the warehouse as the SMSF does
not have enough capital to fund the purchase”
False
“The SMSF can purchase the warehouse using funding from some of the SMSF’s
balance and the remainder from a loan which will be secured against the property
and other assets of the SMSF”
True
“The SMSF can use the borrowed funds for the purchase of the warehouse which is
a ‘single acquirable asset’.The borrowed funds can also be used to repair and
maintain the single acquirable asset, but the money cannot be used to fund
improvements to the warehouse”
True
“If a bare trust is used to acquire the warehouse, the SMSF will have beneficial
interest and a right, but not an obligation, to acquire the legal ownership of the
warehouse, or any replacement, through the payment of further instalments”
True

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
“Assuming that the SMSF is able to obtain a loan to fund part of the warehouse
purchase, if the value of the warehouse falls below the loan value, the SMSF would
need to provide further funds to the lender to ensure that the loan does not exceed
the value of the warehouse”
True
"If Henry and Marie decide to close the business they will be able to demolish the
warehouse and replace it with four smaller retail buildings"
False
Question 3.2
Henry and Marie, as directors of the corporate trustee decide to set up a Bare Trust and borrow the funds to
purchase the warehouse. Will Henry and Marie's business, 'Soaps for you', be able to enter into a lease
agreement with the SMSF? Explain how this is, or is not, possible.
Question 3.3
The size of the warehouse is 500 square meters and it is situated in an industrial area with 9 other warehouses
of the same size. The other warehouses are leased to various tenants for between $500 - $550 per week.
Henry and Marie proceed to prepare a lease between 'Soaps for you' and their SMSF. The lease states that
'Soaps for you' will rent the warehouse from the SMSF for $400 per week. What are the tax consequences in
respect of the income that the SMSF will receive under this arrangement?
The business does have the ability to enter into a lease agreement with the SMSF as SMSF
motivates in undertaking investments in real estate properties as this would be helpful in
increasing the level of asses in the fund that would provide higher returns to the couple.
With respect to this scenario, it is seen that a 15% tax would be levied on the annual income that
would be received from the rent.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Scenario 2
One of Henry and Marie’s favorite employees who is not related to them, Emmanuel, indicates he wants to
take control of his superannuation money just like Henry and Marie have done, and given his close working
relationship with Marie and Henry, offers to rollover his superannuation monies into their SMSF (i.e. into the
Henry and MariePowell Superannuation Fund) so he can also participate in the property investment
opportunities Marie and Henry have been talking about. Emmanuel currently has $250,000 in superannuation.
Questions for Scenario 2
Question 3.4
Can Emmanuel become a member of the Henry and Marie Powell Superannuation Fund? If yes, why, and if no,
why not?
Question 3.5
Can Henry and Marie allow their two daughters Jessica (22years old) and Amanda (16 years old) to become
members of the Henry and Marie Powell Superannuation Fund?
Yes Emanuel can become a member of Henry and Marie in the Superannuation fund because a
maximum of four members are allowed to stay in the SMSF.
Yes, Jessica and Amanda can become members of the Henry and Marie Superannuation Fund and
it is important that their benefits are segregated from the assets of their parents within the fund.
This should be done through the use of separate bank and investment accounts, and the SMSF
accountant or administrator must have the skills and systems to handle segregated investments
without incurring additional administration costs.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 3.6
Are Jessica and Amanda required to become directors of HMP Pty Ltd, the trustee for the Henry and Marie
Powell Superannuation Fund? Will this change in the future? Please provide a full explanation.
Scenario 3
Henry and Marie are looking into the possibility of including their private company shares in'Soaps for you' as
part of their SMSF.
Questions for Scenario 3
Question 3.7
Henry convinces Marie that their SMSF should buy 100% of their own private company shares valued at
$35,000 from themselves. To be clear, the entire share capital in 'Soaps for you' is owned by Henry and Marie
and it trades as a private ‘Pty Ltd’ company. Assuming the balance of Henry and Marie’s SMSF is valued at
$720,000 - are they able to do this? Explain.
Henry and Powell are required to be the directors of the HMP Pty so that they can appoint their
children in the fund and they have the ability to change in the future according to the situation
and can leave the position of the directors and can hold any other position.
They have the ability to pay for the purchase of the private company shares that are valued at
$35,000 and it is seen that the couple have a SMSF valued at $720,000. It is even seen that
purchasing the shares would increase the asset and returns for the fund but in this case incrsaes
the risk for the fund as well.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 3.8
On 1 July of the following year, Henry and Marie's SMSF is valued at $780,000 as a result of good investment
returns. The private company shares are now valued at $50,000. The auditor is concerned about the level of
in-house investments. Why would this be a problem?
Question 3.9
Identify two options to address the auditor's concerns about the level of in-house investments in question 3.9.
The auditor is concerned about the level of in-house investments because the level of in-house
investment should not be more than 5% of the total assets but in this case it is seen that the
couple has in-house investments of $50,000, which is very high as the amount should be $39,000.
The two options that can be provided are:
(i) Make new options for saving in the capital gains and thereby improve the level of in-
house investments.
(ii) Undertake investments in external properties and assets so that the total value
increases.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Assessment Activity 4
Short Answer
Self-Managed Super funds
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all7 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 4.1
Greg and Andrea Hackett have been married for 15 years and they set up the Hackett SMSF in 2010.Greg holds
shares in Telstra in his individual name which have a current market value of $15,000. Explain how Greg would
be able to transfer his individually held shares into the Hackett SMSF in July 2017.
Question 4.2
The table below shows the acquisitions and disposals for the GJB Super fund.
NAME OF SHARE PURCHASE DISPOSAL
Woolworths $10,000 8th August 2012 $12,000 10th October 2016
David Jones $15,000 10th October 2016 $18,000 1st December 2016
Telstra $20,000 5th January 2011 $24,000 5th March 2017
ANZ $25,000 5th January 2017 $27,000 10th April 2017
Telsta is a listed company. Hence, as per the Australian super rules, Greg can transfer his
individually held shares into the SMSF at current market value. However, if the market value of
the shares are higher than the value, at the time of acquisition, then it would bring forward
capital gain tax issues.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Disregarding brokerage costs and any other financial aspects of the fund, calculate the amount of capital gains
tax that the fund will be required to pay for the 2016 -2017 financial year. (There are no carry forward losses).
The members of the fund, Greg, James and Bob are all in the accumulation phase.
Question 4.3
The Joan and Jack SMSF received dividends from the fund's investments in Australian shares. The dividends
received were $4,000, with franking credits worth $1,714. All of the dividends are 100% franked and all of the
shares satisfied the minimum 45 day holding period. All of the assets in this fund are supporting retirement
pensions for the fund members - Joan who is 70 and Jack who is 75. Calculate the after-tax income associated
with the share investments in the SMSF.
HINT: you may need to revisit the dividend imputation section in Module 2.
Question 4.4
Andrea, Brad and Charlie are the members and trustees of the ABC Super Fund. Brad has nominated his wife,
Camille, to receive his member balance from the ABC Super Fund in the event of his death. This nomination
was arranged via a non-binding nomination. Brad dies and the surviving trustees (Andrea and Charlie) now
need to arrange the payment of Brad’s member benefit from the Self-Managed Superannuation Fund. Must
Andrea and Charlie pay Brad’s death benefits to Camille or can they use their discretion? Explain why or why
not.
The shares of Woolworths and Telstra, which are purchased at a total cost of ($10000+$20000) $30000,
have been held for more than 12 years. Therefore, the members can claim CGT discount of 1/3 on the total
capital gain tax for these two shares. For the other two shares, the 100% of the difference between disposal
value and purchase value would be considered for capital gain tax purpose. Hence, the total taxable
amount would be [($2000+$4000)x2/3 +($3000+$2000)] $9000
It means the capital gain tax , required to pay for the disposal of the stocks, would be ($9000 x 15%) $1350.
In general, pension income from SMSf are taxed at the rate 15%. However, as all the assets in the
SMSF fund of Joan are Jack are supporting the retirement pension, Joan and Jack can claim tax
exemption for the dividend income and their after tax income associated with the share
investment in the SMSF would be $4000. However, both Joan and Jack has to ensure that the
minimum annual pension payment should be at least 5% for Joan and 6% for Jack.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 4.5
Would your answer to question 4.4 change if Brad had nominated Camille as his beneficiary via a valid binding
death benefit nomination? Explain why or why not.
Question 4.6
Assume that Brad had nominated his friend, Steve, to receive his death benefit from the ABC Super Fund via a
properly-executed binding nomination. Would the surviving trustees (Andrea and Charlie) be required to pay
out Brad’s member balance to Steve in the event that Brad dies? Explain why or why not.
As per general rule, Andrea and Charlie, the remaining trust members of ABC Super, can pay the
death benefit to Camille either in lump sum or in the form of income stream. However, the
nomination of Brad had been arranged via non-binding nomination, they may also pay it to
Brad’s estate for the executor to distribute the death benefits as per the instruction of Brad’s
will.
If Brad would nominate Camille via valid binding nomination, then the other trust members must
have to pay the death benefits to Camille directly as per the super law and deeds.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 4.7
Briefly describe the difference between segregated and unsegregated assets relating to investments within a
Self-Managed Superannuation Fund.
If Brad would nominate his friend Steve via properly executed binding nomination, then also the
surviving members would be bound to pay the member balance of Brad to Steve. However, as
Steve is not a dependant of Brad, he must be paid the benefits in lump sum.
If an SMSF's assets are specifically set aside for paying a super income stream benefit, then such
assets are defined as segregated assets and the assets, which are not set aside specifically for the
super income stream, are considered as unsegregated assets.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all8 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours
Assessment Activity 5
Simulation Exercise
Self-Managed Super funds

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Background to part A: Stephen and Rachael
Stephen and Rachael are members of the S&R Superannuation Fund. Stephen is 60 and his SMSF member
balance is $880,000 comprising $132,000 tax-free component and $748,000 taxable component. Rachael is 59
and her SMSF member balance is $100,000 which is all a taxable component. Stephen and Rachael’s SMSF
balances are both in the accumulation phase. Stephen and Rachael have just retired. Neither of them have had
any superannuation contributions made on their behalf in the current financial year and all previous years’
contributions were within their annual contribution limits.
Required
Question 5.1
Based on 2017/18 financial year rates, explain why it would be possible for Stephen to withdraw $300,000 of
his SMSF balance as a lump sum and then give the funds to Rachael for her to contribute the funds back into
their SMSF as a non-concessional contribution.
Question 5.2
If Stephenwithdraws $300,000 from his $880,000 SMSF balance, what tax-free and taxable components would
comprise the $300,000 amount withdrawn?
Stephen is 60 years old. Hence, if is assumed that the taxable component of Stephen’s super
balance is comprised of taxed element, then any lump sum amount withdrawn by Stephen from
either tax-free component or taxable component would be non-taxable.
On the other hand, as the super balance of Rachel is lower than $1.4 million, the bring-forward
non-concessional contribution cap limit for Rachael is $ 300000.
Hence, Stephen can easily withdraw $300000 as lump sum from his super without paying any
additional tax and give it to Rachel, who, in turn can contribute it in her super without any
obligation.
The tax free component of Stephen is $132000 and taxable component is $748000. Therefore, it
can stated that his super fund is comprised with 18% tax-free component and 82% taxable
component. In such scenario, the lump sum withdrawal of $30000 would be comprised of $52941
as tax-free component and $247058 as taxable component.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 5.3
If Stephen withdraws $300,000 from his $880,000 SMSF balance, his SMSF member balance will reduce to
$580,000. What tax-free and taxable components would comprise the residual $580,000?
Question 5.4
If Rachael adds the $300,000 proceeds to her SMSF member account as a Non-Concessional Contribution,
what would be the resulting tax-free and taxable components of her SMSF member account? Please show
both the dollar figures and the percentages of the new tax-free and taxable components.
As per the percentages, calculated above, the tax free component for the balance $580000 would
be $102353 and taxable component would be $477647.
As Rachael would contribute $300000 in her super as non-concessional contribution, hence, it
would be considered as tax-free component in her super. In such case, the tax free component of
her super would be $300000 and taxable component would be $100000. Therefore, it can be
stated that out to total fund of $400000, 25% is taxable component and 75% is taxable
component.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Background to Part B: Peter and Eliza
Peter and Eliza are members of the P&E Superannuation Fund. Peter is 67 and his SMSF member balance is
$650,000 comprising $455,000 tax-free component and $195,000 taxable component (from a taxed fund).
Eliza is 68 and her SMSF member balance is $560,000 which is a 100% taxable component (from a taxed fund).
Peter and Eliza have two children, Max who is 40 years old and financially independent, and Mildred who is 45
years old, intellectually disabled and requires full-time care.
Question 5.5
Upon Peter's death, his benefit is to be split 50/50 between his children Max and Mildred.
How much tax would be payable upon Max inheriting his share of Peter's death benefit? (Please base your
answer on 2017/18 financial year tax rates).
The percentage of tax free component and taxable component of Peter’s super fund are 70% and
30% respectively. Max would receive 50% of Peter’s death benefit, i.e., $325000. Out of $325000,
($325000 x 70%)$227500 would be tax free component, on which Max does not have to pay any
tax. He has to pay on the balance $97500. However, though Max is Peter’s son, he is not
dependant of Peter. Therefore, he would receive the benefit as lumpsum and pay tax on $97500
at his marginal tax rate or 17%, whichever is lower.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 5.6
Upon Peter's death, his benefit is to be split 50/50 between his children Max and Mildred.
How much tax would be payable upon Mildred inheriting her share of Peter's death benefit? (Please base your
answer on 2017/18 financial year tax rates).
Question 5.7
Upon Eliza's death, her benefit is to be split 50/50 between her husband Peter and her son Max.
How much tax would be payable upon Max inheriting his share of Eliza's death benefit? (Please base your
answer on 2017/18 financial year tax rates).
Being an independent beneficiary, Max would receive $50000 from Eliza’s death benefit in the
form of lump sum amount. As Eliza’s super fund is comprised of 100% taxable component, Max
has to pay tax on the full amount received at his marginal tax rate or 17%, whichever is lower.
As Mildred is dependant on Peter, she can withdraw the benefit in form of either lump sum or
income stream. However, if she withdraw it as lumpsum, then like Max, she has to pay on
$97500 at her marginal tax rate. However, due to her permanent incapacity, she would get 15%
tax offset on the tax payable.

DFP+SMSF Module 3Wkplace Simulation1707
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 5.8
Upon Eliza's death, her benefit is to be split 50/50 between her husband Peter and her son Max.
How much tax would be payable upon Peter inheriting his share of Eliza's death benefit? (Please base your
answer on 2017/18 financial year tax rates).
Peter is the spouse of Eliza and is 67 years old. Hence, Peter soes not have to pay any tax on the
inherited detah benefit of $50000.